Technology for Competitive Differentiation
Significant changes in information and process technology is dramatically changing the operations of organizations. As comprehensively outlined in the technology and operations management area, technology adds value through innovative products and process design. Additionally, technology enhances project management in an organization. Consequently, technology enables businesses to respond to competitive threats nimbly. It provides an advantage through competitive differentiation (Reid & Sanders, 2019). Incorporating technology for competitive differentiation allows organizations to increase production capacity while maintaining superior value and affordable prices. In the section, the performance gaps in the operations of Starbucks are identified. Subsequently, relevant technological solutions are recommended. This aims at providing a competitive advantage by boosting the production capacity and improving the quality of products
Performance in Store Management and Operations
Store operations segment at Starbucks majors on inventory management, production, and customer service. Although these areas perform relatively well compared to other industry players, there are performance gaps in the areas.
Inventory Management at Starbucks
Current Practices. Inventory at Starbucks includes raw ingredients, raw materials, processing equipment, and consumables such as packaging materials. These materials are essential in meeting consumers’ demands. At Starbucks, inventory management involves the specification of space for storage, layout, and replenishment. At Starbucks, replenishment is of roasted coffee done daily. It uses the P system. The store managers coordinate with regional managers for replenishment. This is usually done at night. Daily deliveries ensure the freshness of coffee beans used. Ove time, Starbucks has positioned itself as the purveyor of the highest quality coffee. It achieves this by using freshly roasted coffee beans. Similarly, Starbucks uses the EOQ model for items such as milk, coffee cups, and coffee cakes. Starbucks EOQ model aims at maintaining a safety stock of 15%. This helps in avoiding stockouts. Forecasting is done using point of sales data. The inventory management system of Starbucks assumes that consumer demand is relatively constant, except during changing seasons and school breaks. There exist several gaps in the inventory management system as outlined below;
- There are several intermediaries in replenishment communication. Replenishment communication originates from the store managers to the distribution centers via the regional managers. This may cause delays in the supply chain.
- The inventory management system at Starbucks assumes a constant demand. This may lead to inaccurate forecasts, especially during peak seasons.
Improvement Opportunities. The improvement opportunity in inventory management involves the introduction of an enterprise resource planning system with inventory management capabilities. The delivery and forecasting functions will benefit from technical solutions.
How Technology can be Used to Fill the Gap in Inventory Management. The implementation of an ERP system will ensure real-time communication with the distribution centers. ERP provides complete visibility and optimizes the inventory systems through efficient tracking, reporting, and data sharing between the stores and the distribution centers. This eliminates intermediaries in the delivery system. Apart from real-time communication, the adoption of an ERP system will provide accurate demand. This will ensure sufficient supply during peak seasons and school breaks.
Consequently, this makes Starbucks more agile in its operations (Mason, Cole & Goza, 2017). Ideally, ERP systems are scalable, flexible, and modular enough to adapt to market dynamics. Also, the technical solution’s adoption in the form of ERP software increases inventory management efficiency. Subsequently, Starbucks will save on costs by avoiding delays or stockouts.
Customer Service at Starbucks
Current Practices. Starbucks has exemplary customer service. It is guided by its mission of nurturing human interactions through a cup of coffee to provide the best experience to its customers. The baristas are trained to treat customers with courtesy and with a smile. Additionally, they are friendly and greet regulars by their names. Also, Starbucks has invested in the store layout to provide its customers with an ambient environment (Azriuddin et, al. 2020)
. Starbucks has positioned itself as the third-place from home and work. The stores have a secure and fast Wi-Fi network to allow customers to finish their jobs over a cup of coffee. Currently, the average customer service at Starbucks is three minutes.
Starbucks has introduced the Starbucks App® in a bid to provide alternative business channels. This has been effective in reducing queue balking in the stores. Also, it has ensured continuity of business, especially during this COVID-19 pandemic. Another excellent customer service initiative is the partnership with uber eats. This meets the needs of the consumer by bolstering efficiency in customer service. Despite the prowess in customer service, gaps exist in the customer service function, as identified below;
- Currently, the average customer service time is three minutes. This causes long queues, especially during peak hours.
- Customer traffic from Starbucks App® overwhelms customer service delivery.
Improvement Opportunity. Although the customer service function of Starbucks works with amazing efficiency, there is an opportunity for improvement. The long customer service time at Starbucks should be reduced for convenient customer service. Automation of the customer service will bolster the customer service function.
How Technology can be Used to Fill the Gap in Customer Service. The main goal of incorporating technology in the customer service segment is to reduce the average service time. Starbucks should automate customer service delivery by adopting a click and mortar model that prioritizes online ordering (Roet-Green, R., & Yuan, 2020). Also, Starbucks should form an internal delivery system instead of relying on third party services such as Uber Eats. By doing this, Starbucks will expand its service capacity and reduce service time. Besides the reduction of customer service time, incorporation of technology will improve the visibility of business (Haksever & render, 2017)
. Starbucks can conveniently monitor its performance based on online interaction with customers. Also, the implementation of an online model enables target marketing. Consequently, Starbucks will be able to gain critical insights into consumer activity.
Coffee Production and Preparation at Starbucks
Current Practices. Currently, Starbucks coffee preparation majorly depends on the baristas. They mix the ingredients manually to the required quantities. Although this practice is effective in providing high-quality coffee, it contributes to delays in customer service. The speed of service delivery depends on the individual barista’s speed. Therefore, the gap in coffee preparation function of store operations is;
- The overreliance on the baristas for coffee preparation lowers service delivery capacity.
Improvement Opportunity. Starbucks should consider automating the preparation and production function of store operation using fully-automated coffee preparation machines that do not need the baristas input. The baristas’ role will be batching of the ingredients.
How Technology can be Used to Fill the Gap in Coffee Preparation. The overall implication of introducing a fully automated preparation technology is the reduction of customer service duration. Similarly, Starbucks will increase its revenue due to increased sales and service capacity. Also, it will ensure uniformity in the quality of coffee prepared throughout the stores. This is in line with Starbucks’ vision of being the purveyor of the best coffee in the market. Consequently, the giant coffee house will gain a competitive advantage over its competitors, such s Dunkin Donuts. Other benefits of automation of coffee preparation include increased productivity and reduced operating costs.
Incorporation of technology in the operations of Starbucks Corporation enhances the efficiency of operations, increases production capacity, reduces production costs, and ensures consistent quality in the products and services offered at the stores. Consequently, the incorporation of technology in areas of operation provides competitive differentiation. It enables Starbucks to offer faster and personalized services that meet the needs of consumers compared to its competitors. Additionally, it advances Starbucks’ strategy of using differentiation for competitive advantage by offering high-quality products. This highlights the critical role of technology in enhancing the operation of an organization.
References
Mason, A., Cole, T., & Goza, N. (2017). Starbucks: A Case Study of Effective Management in The Coffee Industry. Journal of International Management Studies, 17(1).
Reid, R. D., & Sanders, N. R. (2019). Operations management: an integrated approach. John Wiley & Sons.
Azriuddin, M., Kee, D. M. H., Hafizzudin, M., Fitri, M., Zakwan, M. A., AlSanousi, D., … & Kurniawan, O. (2020). Becoming an International Brand: A Case Study of Starbucks. Journal of the community development in Asia, 3(1), 33-43.
Haksever, C., & Render, B. (2017). Service and Operations Management. World Scientific Publishing Company.
Roet-Green, R., & Yuan, Y. (2019). Information visibility in omnichannel queues. Available at SSRN.